Value-based vs Fee-for-service-based Care

Category: Fee-For-Service

It is no longer big news or a huge realization that the transition from fee-for-service-based care (FFS) to value-based reimbursement will take years—and that this transition will hurt healthcare organizations and healthcare practitioners in the short run. Meeting value-based goals requires hospitals to reduce utilization among their populations, therefore reducing their procedure volume and revenue.

Many of today’s value-based incentives and penalties rely on quality measures. For many years, providers have submitted quality measures for programs such as Hospital Inpatient Quality Reporting (IQR), Hospital Outpatient Quality Reporting (OQR), and Physician Quality Reporting System (PQRS). The fact that these measures are now tied to penalties and incentives is new. These new value-based models require providers to prove that they’re meeting quality standards and benefiting patients while cutting costs. And this is just one argument in the Value-based vs Fee-for-service-based Caredebate. This switch to value-based reimbursement turned the traditional model of healthcare reimbursement on its head, causing providers to change the way they bill for care and track their billings and payments. Instead of being paid by the number of visits and tests they order (fee-for-service), providers’ payments are now based on the value of care they deliver (value-based care).

Providers need sophisticated analytics to help them measure financial and quality performance for each patient population. They don’t want to learn that their reimbursement is going to be poor when it’s too late to do anything about it. Providers want to know in the first quarter so they can improve their performance before the end of the year. To do this, they need to be able to measure performance on a continuous basis. Furthermore, if they aren’t meeting quality standards, they need to be able to pinpoint the cause: Does performance differ by facility? Which providers are performing best and what can be learned from them? It’s one thing to handle this level of performance analysis for a single patient population or a single quality measure; it’s another story altogether when you consider how quickly the number of measures a health system must track multiplies. For example: tracking 30-day readmissions—a small but important area of performance measurement. For the last few years, Medicare has required hospitals to track their 30-day readmissions rates for heart attack, heart failure, and pneumonia patients. Medicare is adding three additional populations to this requirement. Many private payers require that health systems track this measure for populations covered in their contracts. Health systems must also track 90-day readmission rates. This 30-day readmissions example is further complicated by the myriad of potential quality measures and patient populations, demonstrating how complex this process can become.

As hospitals continue to eliminate waste, improve quality, and reduce costs, they will increase patient volume. Payers will see that a given hospital is a top performer and include it in their networks. Payers and even large employers, such as Wal-Mart or Target, are becoming laser-focused on this issue; they want their employees and members to go to the highest-performing facilities for care and incentivize them to do so. Increasing patient volume is key to counteracting the loss of procedure volume that comes with a value-based system. The good thing is that this increased patient volume even though it leads to increased workload per doctor or healthcare practitioner, will be handled efficiently. Because switching from value-based to fee-for-service requires in overall quality improvement strategy, the processes and workflow of the healthcare organization will already be improved on thus making the increase in workload seamless. It could also lead to an increased level of physician engagement. As physicians will automatically become more involved and engaged as they seek to understand the new fee-for-service-method they have no choice but to be involved in other aspects of the healthcare organization and thus have increased engagement.